Chapter 11 - Chapter 11 The Monetary System 1. Functions of...

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Chapter 11 – The Monetary System 1. Functions of Money a. Medium of Exchange i. An item that buyers give to sellers when they purchase goods. ii. Money is the commonly accepted medium of exchange b. Unit of Account i. The yardstick people use to post prices and record debts. ii. When measuring and recording economic value, we use money as the unit of account. iii. $20 for a shirt and $2 for a hamburger doesn’t mean a shirt is worth 10 hamburgers c. Store of Value i. An item that people can use to transfer purchasing power from the present to the future. 2. Kinds of Money a. Commodity Money i. Money that takes the form of a commodity with intrinsic value. 1. Intrinsic Value – The item would have value even if it were not used as money. 2. Gold has intrinsic value because it is used in industry and in the making of jewelry. 3. Money is said to be operating under a gold standard if an economy uses paper money that can be converted into gold on demand. 3.
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This note was uploaded on 12/03/2008 for the course ECO 2013 taught by Professor Johnhodgson during the Spring '08 term at University of South Florida - Tampa.

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Chapter 11 - Chapter 11 The Monetary System 1. Functions of...

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